Theranos Founder, Elizabeth Holmes, Is Barred From Running Lab for 2 Years

Elizabeth Holmes, the founder and chief executive of Theranos, has seen her personal wealth fall from $4.5 billion to zero. Brendan McDermid/ReutersUnited States regulators have banned Elizabeth Holmes, the chief executive of Theranos, from owning or operating a medical laboratory for at least two years, in a major setback for the embattled blood-testing start-up and its once widely lauded founder.

In a statement late Thursday, Theranos said the regulators revoked the certification of its Newark, Calif., laboratory and prohibited the laboratory from taking Medicare and Medicaid payments for its services. Regulators also levied a monetary penalty that Theranos did not specify. The sanctions take effect in 60 days, Theranos said.

Theranos represents the promise and the pitfalls of the start-up era, as money floods into young companies with new technologies in an effort to find a “unicorn” — a billion-dollar business that transforms its industry and makes its backers rich in the process. The high-profile start-up rose to prominence on the promise that it could detect health ailments by testing blood drawn cheaply by the mere prick of a finger.

The government scrutiny stemmed from questions about the effectiveness of Theranos’s technology and the way it operates its labs. Authorities who reviewed its practices last year found that all 81 patient results they inspected were inaccurate in a test of blood clotting administered from April to September on patients who take the blood thinner warfarin.

What Theranos and Ms. Holmes will do next is not clear. Lab operators have the right to appeal a canceled certification. Reached via email, an outside spokesman for the company declined to comment.

Continue reading the main story“We accept full responsibility for the issues at our laboratory in Newark, Calif., and have already worked to undertake comprehensive remedial actions,” Ms. Holmes said in a statement.

Theranos and its young founder in particular offered a compelling narrative in the crowded start-up universe: a brilliant college dropout with an audacious idea that would upend the medical testing business. Ms. Holmes invited comparisons to the Apple co-founder Steve Jobs because of her youth, her tight control of the company she founded and even her customary black turtleneck sweaters.

Ms. Holmes began the company in 2003 after dropping out of Stanford University at the age of 19. Her goal was to create a new way to perform blood tests that relied on a few drops of blood rather than the larger amounts medical testing often requires. Tests would be cheaper, the argument went, and more people would be inclined to get them. In interviews focused on Theranos’s success, she said the idea came from her fear of needles.

The idea had appeal. Theranos won backing from tech luminaries like the software mogul Larry Ellison, while the company counted Henry Kissinger, the former secretary of state, and the former Senate majority leader Bill Frist among its advisers. It also struck a deal with Walgreens, the drugstore chain, to perform tests. By last year, the company had assembled an eminent board of directors and commanded a valuation of about $9 billion.

But some people questioned the reliability of the tests, including former Theranos employees who took their concerns to federal regulators. Ms. Holmes defended the company publicly, especially after articles last year in The Wall Street Journal enumerated those concerns.

Still, federal inspectors found deficiencies in the Newark plant that could lead to inaccurate results, including inadequately trained employees and samples stored at the wrong temperature. Theranos promised to overhaul the plant and bring in a new slate of experts to fix its problems. Then, in April, Theranos said it was under criminal investigation from the United States Justice Department and disclosed another inquiry from the Securities and Exchange Commission.

As the scrutiny mounted, Theranos faced a cascade of problems. The company’s chief operating officer resigned and its alliance with Walgreens fell apart.

The sanctions disclosed on Thursday were leveled by the Centers for Medicare and Medicaid Services, an arm of the United States Department of Health and Human Services that regulates laboratory testing performed on humans.

In its statement, Theranos said it would shut down and rebuild its Newark lab “from the ground up” and bolster its personnel and training there. Theranos said it would stop patient testing at the Newark facility immediately, before the sanctions take effect in 60 days. The company will continue to offer services through its lab in Arizona, it said.

Continue reading the main storyThe company was “disappointed” with the decision, Ms. Holmes said in the statement, adding that Theranos was committed “to demonstrating our dedication to the highest standards of quality and compliance.”

Correction: July 8, 2016 An earlier version of this article misstated the results of a review last year of practices at a Theranos lab. Authorities found that all patient results from a particular blood-clotting test administered from April to September were inaccurate; they did not find that all patient test results were inaccurate.

Totaly agree with that. Exactly what is this amazing Edison device supposed to diagnose from a microlitre of blood ? According to Wikipedea the FDA provided limited approval for Theranos' Edison device for use in a herpes simplex virus (HSV-1) blood test which tests for disease using a finger-prick's worth of blood, but did not verify its accuracy.I'm not a biochemist but I guess you would have to add a reagent to the blood that would then react with the herpes virus and you measure for certain reaction compounds. Obviously it didn't work.I don't know what the law says but surely this should have been clinically trialled if it's diagnostic equipment.

Elizabeth Holmes is largely a figurehead that had a bad idea that sounded good. The backers and enablers that actually put her on the map are the real villains, and they will suffer nothing other than the loss of other people's money.

Totaly agree with that. Exactly what is this amazing Edison device supposed to diagnose from a microlitre of blood ? According to Wikipedea the FDA provided limited approval for Theranos' Edison device for use in a herpes simplex virus (HSV-1) blood test which tests for disease using a finger-prick's worth of blood, but did not verify its accuracy.I'm not a biochemist but I guess you would have to add a reagent to the blood that would then react with the herpes virus and you measure for certain reaction compounds. Obviously it didn't work.I don't know what the law says but surely this should have been clinically trialled if it's diagnostic equipment.

Diagnosis of herpes simplex (HSV-1 or HSV-2) in such a test would have to be done using fluorescent antibodies, which has to be added to the blood.

How are existing herpes tests run? Is it only blood, or can they do oral/genital mucosa swabs? I would assume it's blood, since it's a virus, therefor you have antibodies, right?

Fun fact: If you've ever had a cold sore (fever blister), you have herpes! (HSV-1 is more common orally, if I remember right.)

Doubly Fun Fact: 40% of the sexually active population have gentile herpes, though less than 10% will ever have an outbreak. Most who carry it never know, but they can still pass it on (sharing is caring), even without any visible sores! Furthermore, condoms are not always effective protection against herpes; there are a number of factors that can influence the transmission. Normally it's not part of a standard STD panel test and must be specifically requested.

Diagnosis of herpes simplex (HSV-1 or HSV-2) in such a test would have to be done using fluorescent antibodies, which has to be added to the blood.

Fluorescent antibodies, I had a feeling it might be done that way, been there, seen that, excite with a xenon flash lamp and measure the fluorescence using a photo multiplier tube and that was probably 25 years ago, not rocket science and it doesn't need a budget of millions. Use stepper motors to drive a small tray containing maybe 96 small plastic vials takes only a few minutes. Edison device

Except that Theranos actually used a products to do thousands of medical tests who's results were bogus. People health could be affected. She might be lucky to avoid jail time, we haven't heard the end of this.

How are existing herpes tests run? Is it only blood, or can they do oral/genital mucosa swabs? I would assume it's blood, since it's a virus, therefor you have antibodies, right?

There is a blood test for HSV IgG - that is antibodies. It will only tell you if you've been exposed. It's possible to have positive HSV IgG and never have an outbreak and not be contagious.

To to a mucosa swab you need to swab fluid from a "deroofed" herpes blister and then do a Tzanck smear or better, a viral PCR test. So you can only do these tests during an outbreak.

Thanks, very interesting. That brings up another question: If there's an outbreak and visible blisters, doesn't that kind of point to herpes in and of itself? So why go through the trouble? (I mean that as a genuine question. I guess maybe there might be other STDs or conditions that present like herpes?)

Except that Theranos actually used a products to do thousands of medical tests who's results were bogus. People health could be affected. She might be lucky to avoid jail time, we haven't heard the end of this.

Weren't all the tests run on standard machines with standard amounts of blood?

Except that Theranos actually used a products to do thousands of medical tests who's results were bogus. People health could be affected. She might be lucky to avoid jail time, we haven't heard the end of this.

Weren't all the tests run on standard machines with standard amounts of blood?

It’s hard to say how Theranos were doing their testing. They have repeatedly obfuscated and misled people about their testing process.

Some (Most? All?) of the blood tests have been done with industry-standard equipment, not their proprietary technology that they always brag about. When government inspectors visited one of their labs, they were shown only standard equipment, not the fancy Edison system. So either Theranos was lying about using their proprietary technology for (at least some of) their testing, or they hid part of their process from the inspectors.

I found this out with a little web research. There’s plenty of information out there, if you don’t stop after the first google result.

Except that Theranos actually used a products to do thousands of medical tests who's results were bogus. People health could be affected. She might be lucky to avoid jail time, we haven't heard the end of this.

I meant from a investor/funding side. The delivering of invalid results, likely knowingly, is pure evil.

The problem I have with all of this is that the figurehead is the only one being punished.

Thanks, very interesting. That brings up another question: If there's an outbreak and visible blisters, doesn't that kind of point to herpes in and of itself? So why go through the trouble? (I mean that as a genuine question. I guess maybe there might be other STDs or conditions that present like herpes?)

Good question. Yes, Herpes is generally a clinical diagnosis - no lab testing needed: A cluster of small painful blisters in a sensitive area after contact with a new partner = Herpes. I've diagnosed it several times and rarely ordered any lab test.

IIRC Theranos marketed a "home testing kit" which is popular - for obvious reasons...

Using a monoclonal antibody to test is proven technology, just that you need to have a large enough sample so the reaction is visible, or it has to at least contrast to the liquid it is in enough to be readable over the normal non reaction result. Small sample might mean there is only going to be a few hundred reactions, and thus either you need to have an amplification of this result to make it readable, or it has to be a very large contrast result.

Easy to test for hormones in a mostly clear liquid like urine, and as there is a lot of the hormone the test is easy. Not so easy testing for a low concentration of a specific antibody in blood unless you first filter off the red blood cells to get plasma so you can have a clearish liquid. Hard to make a microcentrifuge that is both small, cheap, efficient, disposable, works off a single drop and above all reliable and easy to make in bulk.

It was expected to be an academic presentation to show if Theranos Inc.’s controversial blood-testing technology worked, and perhaps explain the science behind the claims that the startup could do lab tests with a fraction of the blood and cost of traditional machines.

Instead, what some of the nation’s top lab-testing scientists and researchers packed into a ballroom at the Pennsylvania Convention Center in Philadelphia got was the introduction of a totally new device.

Founder Elizabeth Holmes, who is facing a two-year ban by U.S. regulators from running a clinical testing company, used the session at the American Association for Clinical Chemistry’s annual scientific meeting to introduce the “miniLab” testing device, a 95-pound diagnostic tool that can fit on a tabletop. The device isn’t yet for sale and hasn’t been approved by regulators, Theranos said in a statement.

Along with the new device came a scaled back vision for the company that not long ago, promised to upend the world of clinical lab testing by running hundreds of tests using a single drop of blood. The miniLab appears to pack a variety of tests that can already be done on a small scale into a single box.

No Game Changer

“They are using the same basic technology that we have been using all along,” said AACC President Patricia Jones, Clinical Director of Chemistry at Children’s Medical Center of Dallas. “But they have miniaturized it, they have put it all in a small platform.”

It’s also not clear how many tests Theranos has validated for use on the machines, or how many finger pricks to collect blood will be needed. “They have a lot of work to do,” Jones said. “There are still so many unanswered questions.”

That assessment was echoed by Stephen Master, a pathologist at Weill Cornell Medicine who helped moderate a question and answer session after Holmes’s presentation.

“It is certainly not yet a game changer,” Master said. While the instruments they presented appeared to have some good engineering behind them, “I certainly didn’t see anything that lives up to the expansive claims they made.”

Cholesterol Test

At the session, Holmes showed several slides comparing test results run on the new machine to existing accuracy standards, including one for a cholesterol panel, that appeared to show the new machine was within guidelines. That wasn’t enough for Master.

“I can buy a point-of-care instrument that does a lipid panel,” he said, referring to existing products already on the market that can run cholesterol tests in a doctor’s office.

The company also said it has developed a test for Zika virus with the miniLab machine that’s been submitted to the U.S. Food and Drug Administration. Angela Stark, an FDA spokeswoman, declined to comment on whether or not the agency had received an application.

Good Comparisons

While the new device may run a smaller number of tests, “the technology appeared to generate results that compared well to existing technologies and that were highly reproducible,” said Eric Schadt, director of the Icahn Institute for Genomics and Multiscale Biology at the Icahn School of Medicine at Mount Sinai.

In introducing the new device, Theranos attempted to hit the reset button. Theranos stopped using an earlier version of its technology, called Edison, after questions arose about their accuracy. The company eventually voided or altered thousands of test results, and some attendees wanted badly to see the company defend or explain its past efforts.

“It is a bait and switch,” said Geoffrey Baird, an associate professor of laboratory medicine at the University of Washington who has been a critic . “We were told we were going to hear about the science of Theranos. This is a new speculative prototype idea that they have,” he said in an interview shortly before the presentation. “It is a completely different instrument” than what Theranos had previously talked about.

The AACC’s Jones introduced Holmes and said that the session wasn’t an endorsement of the company. “This session, as everyone is pretty well aware, has been controversial.”

‘Highly Skeptical’

“We want to see how this works, and that it works,” Jones said in an interview before the meeting. Among her colleagues, almost “everybody is pretty highly skeptical.”

Announcing Holmes’ intent to appear at the meeting in April, the AACC said that its members -- who represent clinical lab testing professionals, researchers and doctors -- would see the company “clarify the science, accuracy, and reliability of Theranos’ technologies, as well as its impact on patient care and safety.”

Once lauded as a potentially revolutionary company in the lab industry, Theranos has fallen far. U.S. inspectors said they found failures so severe as to jeopardize patients’ health at Theranos’s lab in Newark, California, leading to proposed sanctions this year that would ban Holmes from running a laboratory company for two years, along with monetary penalties and cancellation of payments from federal health insurance programs.

“We take full responsibility for our lab operations and are working diligently to rectify all outstanding issues,” Holmes said during her presentation Monday.

The company also has also come under scrutiny by House Democrats, the U.S. Securities and Exchange Commission and the U.S. Attorney’s Office for the Northern District of California. Researchers have called on the startup to publish data supporting its technology in a peer-reviewed scientific journal, where independent scientists could evaluate the data, which it has yet to do.